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Slowdown set to continue

The UK’s economic slowdown is unlikely to end in the next six months, according to a national business organisation. Rising commodity costs and weaker consumer demand will combine to push down next year’s GDP growth to the lowest rate since 1992, according to the Confederation of British Industry (CBI)’s latest UK economic forecast.

The employers’ group said this week that it has lowered its forecast for GDP growth in 2009, by 0.4% to 1.3%. The forecast for growth in 2008 is unchanged, at 1.7%, down only 0.1% on March’s forecast. The slowdown already underway in consumer spending is set to intensify, driving consumption growth down to only 0.7% in 2009 - the lowest since 1992 (0.5%).

Sarah Green, Regional Director for the CBI, said: “Whilst undoubtedly the North East economy will slow in line with national trends, we should recognise that the main contributor to slower growth is the price of oil. Whilst very difficult for those dependent on oil for their manufacturing processes, it is good news for the significant oil, gas and offshore sector based in the North East. Projected increases in exports based on the weakening of the pound will also help insulate the North East economy as the region is a net exporter of goods.”

The CBI predicts that households in the UK will see little or no growth in their disposable income, while savings rates will increase as consumers pay off credit and put more aside for the future.

Ian McCafferty, the CBI’s Chief Economic Adviser said: “Demand has already slowed this year and the extent to which consumers will rein in their spending will be felt most later this year, as they contend with the ongoing squeeze to real incomes and a weaker housing market. Growth should still pick up towards the end of next year but only at a gradual pace, so the economy will feel more sluggish than it has for many years.

“The twin effects of slowing demand and rising commodity prices provide a wind chill factor and will make things feel much less comfortable over the next two years.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .